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Econintersect: It is reported this morning that Japan will totally reorganize its electric power operations. The generation and distribution activities will be split into separate companies. The distribution and generation companies will compete for residential business, ending 60 years of service from regulated regional monopolies. The shift represents a reaction to the power problems that developed following the Fukushima mega-quale and tsunami in march 2011. The inefficiency of the regonal power company, Tepco, in handling the damaged nuclear reactors at that time and since have no doubt been a factor in the decision to make the change. Tepco was essentially nationalized to handle the situation.

Follow up:

An article by Jonathan Soble in the Financial Times is the only news published at the time this is written. Soble reports that the regulated monopoly structure in Japan has been very inefficient. Even before the Fukushima disaster power in Japan was double the cost of the U.S. and three times that in South Korea. One of the problems cited by Soble is that distribution line charges imposed by utilities for power from competitors has inhibited industrial use of competitive power sourcing after that was authorized in 2005. That problem should be eliminated by splitting the generation and distribution businesses.

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